The war in Ukraine, combined with the lingering supply disruptions from COVID-19 are causing worldwide economic problems. This is as true in the Pontiac as it is elsewhere, according to local farmers and loggers. With record high gas prices, fertilizer shortages and a spike in commodity prices like wheat, corn and soybeans, industries in the Pontiac are set to face some unpredictable times ahead.

Input costs like fuel are causing the biggest problem for farmers and loggers, causing the cost of . . .

running machines and transporting goods to balloon.

The big spike in the price of fuel is happening because of the removal of Russian oil from large parts of the world market due to international sanctions sparked by its invasion of Ukraine. “A year ago, you couldn’t give oil away. It’s now $113 a barrel,” said Stuart Adams, a local cash crop farmer with land around Shawville.

“Running one of my logging machines went from $350 a day to $600 a day,” said Bill Milford, owner of HK Logging. “It’s almost costing us to work. We just gotta keep going to make payments.”

For farmers, the increased cost of operating their farm due to gas price increases is now compounded by a shortage of fertilizer, particularly nitrogen-based fertilizer.

Russia is the fourth largest producer of nitrogen-based fertilizer, according to global economics statistics website, Statista, and with the ongoing war, supply is drying up.

“Fertilizer is an issue for sure,” said Adams. “There’s some fertilizer that’s unprocurable.”

“We were getting word of a shortage of fertilizer prior to the Russian attack,” said Scott Judd, president of the Pontiac UPA. As of February, disruptions linked to COVID-19 were to blame, but now with the war, those shortages are likely to get worse, according to Judd.

“It’s going to be hard to decipher whether the origins [of fertilizer shortages] are just from regular cutbacks or high labour costs, or covid, or the war,” added Judd.

“We’re short about a third [of the fertilizer] that has yet to be delivered from Europe,” said Judd. “So, we’re going to be a bit short.”

Judd added that bigger farmers who have ordered a lot of fertilizer are going to get the priority, while smaller farmers are likely to be left out.

The price of farming equipment is also causing problems.

“The price of equipment is just through the roof,” said Adams. “If you want to buy a new planter, forget it, you won’t get it.”

Adams blames the cost of farming equipment on covid restrictions causing productivity at tractor plants to drop, high energy costs, and the global shortage of microchips, which higher tech farm equipment is reliant on.

However, despite all the bad news, there are still glimpses of opportunity, especially for farmers who were lucky enough to buy seed for commodities like wheat, soybeans and corn. Though that opportunity doesn’t come without risk.

The war in Ukraine is disrupting the wheat trade from Russia and Ukraine, who are the third and seventh biggest wheat producers respectively in the world, according to Statista.

“See, the inputs are going to be more expensive,” explained Adams. “But on the other side, you’ve got wheat prices hitting record highs. And at the end of the day, what you’re looking at is your gross margin. And right now, our gross margins per acre are actually fairly good. That’s probably based on the fact of record commodity prices”.

However, since farmers tend to buy most of their seed in the fall or winter to plan for the growing season, they can’t just adjust their plans on the fly as easily as they might like, according to Judd.

This effectively means those who planned to plant crops like wheat at the start of the year may be able to take advantage of the high commodity prices to offset their growing operating costs.

But wheat can often have disappointing yields.

“Its nickname is poverty grass because you put a lot into it and you don’t always get a lot out,” said Judd. “Though with wheat going up in price it might lose that name.

This means there’s a lot of risk involved in growing wheat, especially with high input prices.

“If we have a great season, awesome. If not, it’s going to be very hard to deal with,” said Adams. He added that a dry season or an early frost can be ruinous with all the capital that has to be invested just to get a crop going in the first place.

Regardless of how it goes for farmers though, consumers are definitely going to see an increase in their food bill, according to Adams and Judd, and that extra money doesn’t necessarily go to the farmer.

Judd explained how prices are set for farm produce heavily depending on the market the farmer is in. For example, in a supply-managed industry like dairy production, producers have a big influence over setting the price that allows them to offset an increase in production costs. However, for beef producers, slaughterhouses often have far more influence over setting the price, as they have greater control over the market.

Likewise, Milford explained that there is a similar is a major challenge in the logging industry, as he only has two or three sawmills to sell to which prevent loggers from increasing the price of what they sell to offset higher production costs. So, while gas prices go up, he and the other loggers are getting the same price for their lumber.

“The mills are setting the price so it’s the one making the money,” said Milford.

In terms of short term to medium term solutions, Judd has a few ideas. One is exempting agriculture from the carbon tax, which would help lower input costs for farmers and lower prices from “farm to fork.” In practice this would mean lifting the carbon tax on diesel that is dyed red, signifying it is for agriculture, according to Judd.

In terms of the fertilizer shortage, Judd mentioned that some are advocating for producing Nitrogen based fertilizer in Canada, given that it has the natural gas resources to do so.

Judd acknowledged that both of these solutions would run against efforts to curb C02 emissions.

Though in the short term he said a lack of fertilizer may not have too big of an impact as long as farmers have cared for their soil through proper crop rotation and use of manure.

In the end, farmers and loggers are left to contend with a storm of economic forces largely beyond their control.

“There’s a whole list of dynamics in operation right now and trying to manage that is incredibly complex and difficult,” said Adams.

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